A.M. BestTV: Market Changes Drive U.S. Workers’ Comp Business to State Funds

October 26, 2016 - WorkCompWire

Oldwick, NJ -(BusinessWire)- In a recently released A.M.BestTV episode, A.M. Best analysts, W. Dolson Smith, senior financial analyst, and Connor Brach, associate analyst, said U.S. state workers’ compensation funds have benefited from better economic conditions and a hardening in recent years of the overall workers’ compensation market. However, they may face challenges as pricing softens in some areas.

“Overall, state funds, in the past several years, particularly in 2015 and year-to-date 2016 are doing well,” said Smith. “As discussed in A.M. Best’s recent state funds special report, over the four year period of 2011-2014, workers’ compensation experienced hard market conditions. According to the Council of Insurance Agents & Brokers, there were positive rate increases from the second quarter 2011 through fourth quarter 2014.”

Brach addressed the issue of some of the competitive state funds having privatized, to some degree, in recent years and that A.M. Best expects this trend to continue.

“Although not at the accelerated pace that has been seen in recent years,” explained Brach. “Over the past three years, four state funds have largely completed their privatization initiatives with the primary motivation (being) to improve their competitive position and reduce product and geographic concentration risks,” he added.

He also said that, “concentration of risk exposes a company to potential adverse market conditions, regulatory issues and man-made catastrophe losses that disproportionally affect one line of business or geographic location.”